Bitcoin, the largest cryptocurrency by market capitalization, continued to struggle in price as traders weighed two stressful signals from the US financial ecosystem.
This week, in the wake of the Federal Reserve’s sudden $18.5 billion overnight repo operation, Blue Owl Capital decided to permanently halt redemptions from its retail-focused private credit fund.
In another era, either headline might have been enough to reflexively trigger a “money printer” story.
Taken together, these can be read as early warnings that something is tight in the U.S. market’s plumbing.
However, Bitcoin remains heavy, even as it continues to circulate in the market as a hedge against the traditional system.
The Fed’s $18.5 billion headline is narrower than you think.
The attention-grabbing $18.5 billion figure comes from the New York Fed’s overnight Treasury bond repurchase agreement on February 17th. Financial commentary platform Barchart said this was the fourth-largest liquidity injection since COVID-19 and even surpassed the peak of the dot-com bubble.
However, the series had only $002 million in issuance on February 18 and $024 million on February 19, according to data tracked in the St. Louis Fed’s FRED database.
The order is important. It characterizes the $18.5 billion as a one-day spike rather than a continuous weekly infusion.
The reverse repo side of the plumbing was also quiet. Utilization of the Fed’s overnight reverse repurchase (ON RRP) facility remained small at $441 million on February 17 and $856 million on February 18.
If traders were looking for signs of cash being plentiful, the numbers didn’t convey it.
Repo operations are designed to keep short-term interest rates moving and do not result in balance sheet expansion, which crypto markets often refer to as stimulus.
The New York Fed reports that it conducts daily repurchase and reverse repurchase operations to keep the federal funds rate within limits set by the Federal Open Market Committee (FOMC).
The FOMC maintained its target range at 3.50% to 3.75% at its Jan. 27-Jan. 28 meeting and directed its desk to conduct open market operations as necessary to maintain that range.
This difference is why a spike in repos is not automatically bullish for Bitcoin.
One-time operations can reflect technical frictions such as the timing of settlements, Treasury cash movements, and dealer balance sheet constraints. A rapid reversal is also possible, as the February 18th and February 19th publications suggest.
That is different from a permanent change in the direction of monetary policy.
At the same time, the macroeconomic backdrop is not clearly supportive of speculative assets.
Minutes from the January meeting showed officials were divided on next steps, with some willing to cut rates further if inflation cooled, while others were willing to consider raising rates if progress stalled, Reuters reported.
Even if interest rates don’t change immediately, this combination could reignite fears of “longer highs” and a tendency to tighten financial conditions for risky assets before the Fed moves a single lever.
Blue Owl gate is about liquidity conditions, not immediate credit collapse
Blue Owl’s decision to permanently suspend redemptions on Blue Owl Capital Corp II (OBDC II) carries a different message.
It’s less about sudden waves of losses and more about product structures that promise regular liquidity while holding assets that don’t trade like stocks.
The Financial Times reported this week that Blue Owl would permanently suspend redemptions on OBDC II and temporarily return capital in response to asset sales. The company is selling $1.4 billion in loans across three funds to pension and insurance investors at about 99.7% of face value, according to Reuters.
The sale is designed to allow OBDC II to return approximately 30% of its net asset value while repaying debt.
These details cut the “stress” story in both directions.
Headlines about funds suspending redemptions sound like the gates are coming down. But the ability to sell loans near face value supports the idea that credit markets are partially under stress, rather than completely frozen.
In the case of Bitcoin, this nuance is important. This is because the asset is acting not as an isolated hedge, but as a component of a broader risk complex.
Even if the financial system were sliding toward a chaotic financing event, Bitcoin could be the first to fall as investors hoard cash and reduce leverage.
Therefore, private credit gates are not evidence of a funding crisis. This is evidence that the liquidity premium has a price and that certain retail vehicles are becoming more expensive.
Bitcoin still trades in flows, and flows remain a headwind
The most obvious explanation for Bitcoin’s lackluster response is that the primary demand channel remains external.
By way of background, the US Bitcoin Spot ETF has experienced significant drawdowns, with capital outflows for five consecutive weeks. There were nearly $4 billion in net outflows from 12 funds during the period, according to SoSo Value data.
This is a major reversal for rappers, who were once treated as a one-way bridge to an influx of institutional investors. The “Wall Street Adoption” story is also reimagined.
The same channels that can create sustained demand can also become a stable source of supply when investors exit.
In that context, stressful headlines do not automatically lead to a rally in Bitcoin. When marginal buyers retreat, the market needs something else to fill the void.
So far, we haven’t gotten that.
This is also why the Fed repo printing didn’t have such a bullish outcome. Even traders who tend to interpret liquidity through a cryptocurrency lens will find that this number represents a single day of operations, not a change of government.
At the same time, the ETF flow tape is a current tally of positioning and is negative.
During the first stages of stress, Bitcoin often behaves like a high-beta stock
Another reason Bitcoin remains heavy is behavior, which is evident in the correlations between assets.
A CME Group study released this month reports a sustained positive correlation between crypto assets and the Nasdaq 100 since 2020. From 2025 to early 2026, the correlation could range from +0.35 to +0.6.
This relationship helps explain why Bitcoin doesn’t rise in response to “stress” headlines. In the first stage of risk-off, investors tend to reduce their overall exposure to volatile assets and allocate cash to the safest instruments.
At this stage, Bitcoin is often traded as a leveraged proxy for risk sentiment.
It is only when policy changes and net liquidity improves that the hedging narrative tends to be reasserted.
That’s the second stage, where the market begins to price in easier financing, a lower cost of capital, or a more durable backstop.
Credit markets have not yet shown the extreme conditions that would normally trigger a second stage.
The option-adjusted spread on the ICE BofA US High Yield Index was 2.94% as of February 17, according to FRED. This is not the kind of explosion that usually accompanies an impending funding crisis.
Blue Owl’s loan sales are close to 99.7% of par and in the same direction, with stress and repricing in pockets but not large liquidations.
Why does Bitcoin care about these headlines?
The forward-looking risk is not that one private credit fund changed its redemption terms or that the Federal Reserve conducted a single large overnight repo.
Personal credit has grown into a nearly $3 trillion market, drawing increased scrutiny for transparency, leverage, and valuation practices.
As more funds shift from scheduled maturities to one-time gains, liquidity premiums may rise and borrower credit may become tighter. This is a slow-burning drag that could put widespread pressure on risk assets.
BitMEX co-founder Arthur Hayes has already said Blue Owl’s move to suspend retail redemptions is a sign of growing liquidity stress across the market.
He said this could cause the Federal Reserve to increase money creation sooner than expected.
On the money market front, a key indicator for crypto traders is whether this week’s repo spike forms a pattern.
If repo operations remain sporadic and the Fed halts policy, Bitcoin will likely be driven by ETF flows and risk sentiment, with sustained outflows a headwind.
However, if funding stress persists and more durable policy responses are needed (rate cuts or balance sheet support), Bitcoin’s historical strategy suggests that Bitcoin could fall first and then rise as net liquidity improves.